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BoomingSoutheast Asiain a quandary over U.S.-China rivalry

By Martin Petty

BANGKOK | Sun Jul 8, 2012 8:55am BST

(Reuters) – A U.S.-China tug-of-war over Southeast Asian influence is proving to be a critical test forWashington’s “pivot” East asBeijing strengthens its economic and military clout in its own backyard.

Countries of the Association of South East Asian Nations (ASEAN), one of the world’s fastest growing regions, are weighing up how to play their cards as the United States plays catch-up with the Chinese juggernaut and tries to reassert itself in Asia.

Washington’s recent flurry of engagement with ASEAN states – from thePhilippinesandThailandtoSingaporeandVietnam- is a potential source of friction withChina, especially as tempers flare over territorial disputes and the rapid Chinese military build-up in the resource-richSouth China Sea.

But with longstandingU.S.alliances in the region andChina’s client-state relationship with several members, the ASEAN bloc is unlikely to agree on issues involving the two superpowers at a meeting of their foreign ministers inCambodiathis week.

Individual interests are seen more likely to triumph over consensus at the meeting, which will also be attended by U.S. Secretary of State Hillary Clinton and Chinese Foreign Minister Yang Jiechi.

Some countries will be in a quandary about how to balance ties to get the best out of both of the big players, while others will seek to use the rivalry as an opportunity to extract leverage for economic or military advantage.

Laos,CambodiaandMyanmar, ASEAN’s poorest states, remain inChina’s orbit as a result of no-strings loans, desperately needed infrastructure development, military support and floods of investment from Chinese firms.

Beijingalso has close economic ties withSingaporeandMalaysiaand has been aggressively wooingThailand- a major ally ofWashingtonsince World War Two and the launch pad for its Vietnam War operations – offering loans and technology for a high-speed rail network, hundreds of university scholarships to Thai students and recently agreeing to supplyBangkokwith 10,000 Chinese-language teachers.

Thitinan Pongsudhirak, director ofChulalongkornUniversity’sInstituteofSecurityand International Studies, saidThailandwas a “pivot state” in ASEAN, traditionally close toWashingtonbut now hedging more towardsChina.

China’s strategy inThailandand several other ASEAN countries was not just trade and investment, but building close relationships to serve its long-term strategic interests.

“Chinais already engaged all overSoutheast Asia… they’re the resident superpower here,” Thitinan said. “It’sChina’s stealth power that we’ve not seen, it’s not spoken, it’s not aggressive.Chinacan put a lot more in and doesn’t need something out of it right away.”

U.S.MILITARY POWER

After largely shunning ASEAN under the Bush administration, theUnited Statesmay fear it is lagging behind asChinataps ASEAN’s growth. Some analysts say the new Asian strategy is as much about trying to dispel the notion that Washington’s economic clout is shrinking as China continues to boom.

The obvious signs of renewedU.S.engagement have so far been military-led, with Defense Secretary Leon Panetta visiting the region last month to announce plans to base 60 percent ofU.S.warships in the Asia-Pacific by 2020, allowing theU.S.”to be agile, to be quickly deployable, to be flexible”.

Part of that would be the use of ports in thePhilippines,Vietnamand possiblySingapore, in exchange for training and technical support. TheU.S.is also seeking to set up a humanitarian response centre at a former Vietnam War-era base in U-Tapao inThailand.

Washington’s charm offensive in the region has emboldenedVietnamand thePhilippines, which have tauntedChinawith renewed claims to sovereignty in the South China Sea and prompted talk of possible requests for the deployment ofU.S.spy planes there.

According to several ASEAN diplomats,Chinais suspicious of theU.S.motives and has been lobbying aggressively behind the scenes to shoot down a proposal byVietnamand thePhilippinesto draft a joint ASEAN communique on the maritime dispute as rhetoric heats up again after a recent cooling-off period.

The required consensus is unlikely, however, with ASEAN chairCambodia-China’s biggest regional ally and recipient of billions of dollars of loans and investment – refusing to play ball, diplomats told Reuters.

Yet,Chinaand theUnited Stateshave played down talk of a geostrategic rivalry in the region, welcoming each others’ presence and seeking to allay fears in ASEAN that their influence would negatively affect the grouping.

“Too often in ASEAN there’s a concern … of dangerous strategic competition between theUnited StatesandChina,” Kurt Campbell, the State department’s top official forEast Asiaand the Pacific, said recently.

“It’s our determination and strong determination to make clear we want to work withChina.”

In an interview withThailand’s Nation newspaper two weeks ago,China’s Vice Foreign Minister Fu Ying said ASEAN was an “unquestionable priority” forChina, but in a veiled reference to newU.S.engagement, warned the group to stay independent.

“If ASEAN takes sides, it would lose its relevance,” Fu added.

RESILIENT REGION

U.S.officials stress that the shift in focus towardsAsiais also as much about business.U.S.diplomats say corporateAmericais increasingly interested inSoutheast Asia, encouraged by the plans for the ASEAN Economic Community.

The ASEAN region has shown resilience to the global economic downturn and is currently one of the few bright spots in the world, driven by foreign direct investment, public infrastructure spending and strong domestic demand.

Morgan Stanley has forecast the investment percentage of GDP forIndonesia,ThailandandMalaysiato rise from 22.7 percent in 2011 to 23.2 percent and 23.6 percent in 2012 and 2013.

ButU.S.investment in the region could mean muscling-in onChina’s traditional turf. ASEAN’s biggest-ever meeting ofU.S.businessmen will take place this week inCambodia, an eventClintonwill also attend.

She will also visitLaos, becoming the most seniorU.S.official to do so in 57 years. She will announce aU.S.”Lower Mekong Initiative” offering support in education, environment, health and infrastructure in theIndochinaregion.

Additionally,Washingtonhas started easing some sanctions on fast-reformingMyanmarthat could eventually allowU.S.firms to tap its vast resources, including timber, gemstones, gas and oil, a sectorChinahas so far dominated to safeguard its massive energy needs. AU.S.business delegation will visit the country later this month.

Such moves are good news for China-dependent economies likeLaosandMyanmar, which are now reaching out to other countries to try to diversify their sources of investment.

Most countries publicly say they won’t side withChinaor theUnited States. Some see the engagement is a boon because individual states can exploit the rivalry for their own gain.

Former Thai Foreign Minister Kantathi Suphamongkhon said there was a misperceptionThailand’s closer links withChinameant a deterioration of itsU.S.ties.Thailand, he said, was in a strong position to reap benefits from both countries.

“It is important to avoid seeingThailand’s relations with theU.S.and withChinaas a zero sum game,” he said in an email, adding that ASEAN had always wanted aU.S.presence in the region “as a force for stability”.

But it may have the opposite effect. The indirectU.S.involvement in the South China Sea issue has led to sabre-rattling and growing calls inChinafor a tougher stance on the dispute, which aU.S.official on Saturday said was complicated by “intense nationalist sentiment” in the countries affected.

However, increased tensions, providing they do not escalate into confrontation, could work in favour of ASEAN states.

Though the far-reaching moves byWashingtonandBeijingto court individual ASEAN countries are likely to mean greater investment, the competing interests of the heavyweights may lead to split decisions on ASEAN policy that could dent the bloc’s credibility as its 10 member states and 600 million citizens prepare to be integrated into one economic community by 2015.

“The consequence of theU.S.pivot is any prospect for a unified ASEAN is minimal,” said Michael Montesano of theInstituteofSoutheast Asian StudiesinSingapore.

“Its members are all aligned in different ways and it puts ASEAN as a grouping in a very uncomfortable position.”